As we step into 2024, the auto insurance market poses challenges for consumers. Navigating through rate fluctuations, regulatory changes, and economic impacts is crucial. Let’s explore the challenges faced by auto insurers in 2023 and predict how they might influence the market in 2024.
The personal auto insurance industry encountered challenges in 2023, resulting in higher premiums. Factors like poor rate adequacy, increased car insurance claims, unabated inflation, and rising reinsurance costs contributed to the market’s difficulties.
Despite some promising signs toward the end of 2023, the personal auto insurance market is expected to remain challenging through 2024. High-interest rates and regulatory hurdles may offer relief, but meaningful changes are likely to be felt after 2024.
2024 PREDICTIONS FOR THE AUTO INSURANCE MARKET
As we venture into 2024, the auto insurance market landscape is still grappling with factors from 2023 and earlier. Understanding these influences is vital for consumers navigating the complexities of car insurance.
The U.S. nonstandard auto insurance segment experienced a challenging year with a net underwriting loss of $333 million in the first half of 2023, showing improvement from the $773 million loss in the first six months of 2022.
AM Best highlights persistent challenges, including rate inadequacy, inflationary pressures, and ongoing labor market issues affecting auto repairs and losses from natural disasters. Despite marginal improvement in profitability, distracted driving and poor habits remain contributing factors.
Looking to 2024, experts predict a continued focus on auto insurance rates, which have risen by 18.9% year-over-year. These rates are expected to remain high due to several factors:
Inflation Impacting Costs
Inflation remains a significant factor affecting auto insurance costs, influencing the price of vehicle repairs and medical care costs, both crucial components of auto insurance payouts.
Rising Medical and Repair Costs
The cost of property damage and bodily injury claims has surged in recent years. Medical inflation, in particular, has outpaced general inflation, leading to higher costs for bodily injury liability claims.
Complex Repairs and Technology
New vehicle technologies have made repairs more complex and expensive. For example, repairing a windshield in a late-model vehicle may involve intricate work related to collision-avoidance technologies.
Increased Litigation Payouts
Settlements for car insurance lawsuits have grown substantially, contributing to higher costs for insurers and consumers.
Uninsured & Underinsured Drivers
As rates rise, the number of uninsured and underinsured drivers is also increasing. This trend puts additional pressure on insured drivers to carry proper uninsured and underinsured motorist coverage, adding to their insurance costs.
State Legislation May Help Control Insurance Costs
Some states are taking steps to control rising insurance costs. For example, Georgia’s new law requires a 60-day review period for any car insurance rate increases. Colorado’s laws help ensure that insurance companies’ rate-setting algorithms do not unfairly discriminate against certain groups. Texas law requires insurance companies to charge fair, reasonable, and adequate rates for the risks they cover. The Texas Department of Insurance has the authority to require refunds if an insurance company’s rates are found to be too high.
Usage-based Insurance
The market for usage-based insurance is projected to grow from $57.86 billion in 2023 to $174.33 billion by 2030. Usage-based insurance (UBI) has many benefits, including faster recovery of stolen vehicles with help from location tracking and the use of telematics data to help facilitate a more efficient claims process and accident investigation.
UBI programs, which track driving behavior and driving distance to set rates, are seeing mixed responses. While some consumers are wary of privacy concerns, others see UBI as an opportunity for savings based on safe driving habits.
WHY AUTO INSURANCE PREMIUMS RISE
Facing higher rates without personal fault is inherent in auto insurance. Insurers require adequate funds to cover claims and maintain profitability. When experiencing higher-than-expected claims, they resort to various measures, including rate hikes. If claims exceed collected premiums, rate increases become necessary for the financial health of insurance companies.
LOOKING FORWARD
Throughout 2023 many carriers took action to address their need to return to profitability, but not all carriers took action at the same time. Many of those who made adjustments earlier in the hard market cycle have begun to return to profitability, but they are also cautious about bringing on new business that other carriers may decline or non-renew.
In 2024, the auto insurance market will likely see continued rising rates with gradual improvements amongst all carriers. Consumers should stay informed and explore all available options, such as UBI and other available discounts, to find the most cost-effective solutions.
The auto insurance market is expected to be challenging through the end of 2024, necessitating proactive cost management for consumers. To navigate this tough landscape, understanding the market dynamics is crucial. Experienced insurance agents play a vital role, offering personalized advice, insights, and assistance in exploring cost-saving strategies, discounts, and coverage adjustments.
Agents use their industry knowledge to guide consumers in comparing rates from different insurers, ensuring the best deal for specific needs. Recognizing external factors impacting the market is essential for informed coverage decisions. Despite inconveniences from rate increases, they are integral to maintaining a robust insurance system for consumers when needed most.
Knowledge and adaptability are key in successfully navigating the auto insurance market. Reach out to one of advisors for expert advice and secure the best deal for your auto insurance needs in 2024!
STILL HAVE QUESTIONS?
Patrick Powers
Sr Director of Sales | Private Risk
Patrick is the Senior Director of Sales for Private Risk at RogersGray Insurance.
Patrick started his insurance career at a young age working in his father’s agency. He has experience in both the family agency environment as well as a background working in Fortune 100 carriers. You can connect with him on LinkedIn or by email.